THE RESPONSE OF SHIPBUILDING ACTIVITIES TO FREIGHT RATES

Abstract

Maritime transport has different economic characteristics than most other markets. These features cause continuous cyclical movements on the market and cause some businesses to eradicate from the market due to making the wrong decisions. Apart from the changes in the demand side, the short-term inelasticity of the supply side contributes much to these cycles. The reason is that the shipbuilding process lasts for 1-3 years, and the effects of the ordering decision taken today are reflected in the market when the construction process is over. In this respect, since the main factor influencing the investment decision is income, it is certain that there is a delayed relationship between the freight rates and the completed ship tonnage. The purpose of this study is to contribute to the current literature by empirically testing this delayed relationship, which is already established in theory. The Baltic Dry Index (BDI), which is based on freight rates, is used as a representative of freight revenue. Data used in the study are annual observations covering the years 1985 and 2017. Correlation, regression and cross-correlation methods were used to determine the relationship between freight revenue and completed tonnage. As a result of the study, it was found that the completed tonnage reacted change in the income after 2 years and there was a positive relationship between the variables.